Gold glitters on U.S. Fed stimulus talk
Amanda Cooper?London — Reuters?Published Monday, Sep. 03 2012, 11:02 AM EDT?Last updated Monday, Sep. 03 2012, 11:17 AM EDT
Gold?steadied around five-month highs on Monday, drawing strength from last?week’s indication by the head of the U.S. Federal Reserve that the?central bank could act to shore up growth and by evidence of a strong?pick-up in investor demand.
The gold price rose for a third?successive month in August, with a gain of 4.8 per cent, the largest?one-month increase in price since January, lifted in large part by?expectation for the Fed to signal that it could initiate another?multi-trillion-dollar program of bond buying to keep interest rates low.?More Related to this Story
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Gold?has doubled in price since the Fed first employed quantitative easing,?the practice of buying government debt on the secondary markets to keep?rates low and liquidity high, in late 2008 and has spent more than?$3-trillion in doing so since.
An environment of low real?interest rates, which strip out the effects of inflation, makes gold?more appealing to investors who may find they lose out as returns from?yield- or dividend-bearing assets such as bonds or stocks can diminish.
Holdings?of gold in exchange-traded funds hit a record high by Friday, while?U.S. exchange data showed speculative holdings of gold futures witnessed?their largest weekly increase last week since the start of the year.
Fed?Chairman Ben Bernanke, speaking at an annual central bank conference in?the mountain resort of Jackson Hole last week, left the door open to a?further easing of monetary policy but gave few hints on any imminent?action.
Spot gold was flat at $1,690.80 an ounce, having touched a?five-month high of $1,692.71 on Friday, when it rose 2.1 per cent in?its largest one-day rally since late June.
U.S. gold futures for?December delivery were up 0.3 per cent at $1,692.80 an ounce. The U.S.?market was closed on Monday for a public holiday.
“Gold has?really got to have full-blown (quantitative easing) to really trigger a?rally ... that would be the start of the big push through $1,700 ... but?where it goes from there is a bit more difficult,” Societe Generale?analyst Robin Bhar said.
“It is difficult to see gold at?multi-year highs. I can see it supported by currency debasement around?the world, but it’s difficult to see it going to say $3,000 or $4,000 in?the absence of any other catalyst,” he said, adding that he expected?gold to eventually find a ceiling at around $1,800 an ounce.
The?dollar price of gold is still 12 per cent below last September’s record?at $1,920.30, while gold in euros is just 2 per cent below its record?1,373.92 euros an ounce struck 11 months ago, due to the drag on the?single European currency from the European debt crisis.
Mr.?Bernanke said the stagnation in the U.S. job market was a “grave?concern.” He said the Fed had to weigh the costs as well as the benefits?of more monetary stimulus, although he hinted the costs were likely?worthwhile.
“This has basically been taken to mean that QE3 is a?case of when and not if,” David Govett, head of precious metals at Marex?Spectron said.
“However, gold and silver outperformed the?currencies and the stock markets and as I say, this more than the speech?tells me that from now on, this is a dip buying market. Yes, there will?be setbacks along the way, but fundamentally the market is now in bull?mode and I am looking for a break of 1,700 in the near future and a test?of higher levels soon.”
Gold ETF holdings, often used as a?measure of longer-term investor appetite for the metal, rose to a new?record of 71.728 million ounces by the end of last week.
The net inflow for August stands at 1.898 million ounces, the largest one-month increase in holdings since last November.
The?Fed holds its next meeting to discuss monetary policy on Sept. 12 and?Friday’s monthly employment figures could help further shape investor?expectations for a third round of QE.
Investors are also awaiting?details on the European Central Bank’s plan to buy bonds of more?indebted nations such as Spain and Italy to contain their borrowing?costs and stop the spread of the debt crisis.
The ECB meets on?Thursday to discuss interest rates and investors will be hoping for bank?President Mario Draghi to use the post-decision news conference to?outline how his proposed bond-market intervention program will work?following his pledge in late July to do whatever it takes to defend the?euro.
Platinum was up nearly 1 per cent at $1,543.99 an ounce,?near its highest since early May as a deadly strike at the South African?mining operations of world No. 3 platinum producer Lonmin continued.
Palladium was up 2.4 per cent at $630.00, while silver was up 0.3 per cent at $31.79 an ounce.
1:07 PM on September 3, 2012
Do like the Chinese, take all the American cash and invest in resource companies around the world.
When the Chinese owns the lion share of the worlds materials they will turn around and demand a hefty premium.
That is when you will see mass inflation and a decline of western standard of living.?1 reply?Reply?Report Abuse
12:03 PM on September 3, 2012
....An environment of low real interest rates, which strip out the effects of inflation.....
What? Please review the definition of inflation. Dont think for one monent low real interest rates = low rates of inflation.
Inflation has already occured. The price affect will works it way through.?Reply?Report Abuse
1:52 PM on September 3, 2012
Our?money system has an insatiable goal of creating more debt. We have?consumers, businesses and governments paying interest on money that?didn't exist until it was created at the point the loan took place.
This?sad issue needs to be addressed and soon. The whole system is one big?confidence scheme and once a critical mass of victims understand it, the?game is up.
Too many people are questioning the fundamentals of?dealing with too much debt by offering more credit as seen in America?and Europe. Once confidence is broken; how high will interest rates have?to go to suck people back in to paper? How much tax revenue will be?lost as the gray economy finds gold, silver or various commodities as?it's primary medium(s) of exchange?
You will know confidence is?lost the day you hear your bank is limiting cash withdrawals, transfers?or foreign currency purchases. Hopefully you have some gold or silver?stashed away because; "you ain't seen nothing yet" for monetary metal?prices.?Reply?Report Abuse
12:31 PM on September 3, 2012
I'm tired of stimulus and bailouts, leave our tax dollars alone. Let Capitalism survive or die on its own.?4 replies?Reply?Report Abuse
1:53 PM on September 3, 2012
The?catalyst for Gold to bust through $3-4K might be when it becomes?apparent that the supposedly segragated Gold in bank vaults is not?segragated at all, that it not only has been pledged as physical take?delivery payment on margin call, but that the margin calls on?speculative (never mind fraudulent) plays by banks have been executed?and that the Gold has been taken out of banks.
Gold investors need to re-read their warehouse reciept contract conditions.
They?need to be particularly mindfull of the small print that may say?something like "redeemable in currency at our option and discretion" or?close to that effect.?2 replies?Reply?Report Abuse
2:56 PM on September 3, 2012
Actually,?gold has been glittering a long time, but people don't seem to notice.?There is only one reason why gold is so expensive; reckless governments?spending more money than they take in. Add to that they enjoy bailing?out insolvent businesses of their chosing (read: banks) and you have a?dream made in heaven for gold. You know why? Because gold has been money?for 4500 yrs or so, and in times of trouble people have always?returned. I'm not here to speculate on why this is so, but rest assured,?it is. Until governments get their spending under control, not to?mention their banks (personally I would abolish the entire institution),?nothing will have changed and gold will continue to rise.?You can't solve a debt problem with more debt, and this is exactly what the Fed is trying to do.?4 replies?Reply?Report Abuse
Score: 3?Canadian Centralist
3:13 PM on September 3, 2012
Once?the Fed starts to print with QE3 it will be very difficult to stop.?More important than rising gold price is it's purchasing power for gas,?food, a house etc.?1 reply?Reply?Report Abuse
Score: 2?Rusty Brown
5:58 PM on September 3, 2012
Gold?is liquid, divisible, indestructible, and easily transportable. It also?has a worldwide market and there is no default risk. It is thus cash of?the highest quality."?Erste Group, an Austrian bank.
Score: 1?ALASTAIR JAMES BERRY
12:50 AM on September 4, 2012
Curious thing ......
GOLD?is regaining it's place as the arbritrator of wealth, when all the?World's Financial mavens state that it is IMPOSSIBLE TO RETURN THE WORLD?TO THE GOLD STANDARD .........
When I was a kid ONE OUNCE OF?GOLD BACKED A US $ 20 BILL and ONE OUNCE OF SILVER WOULD BE PAID FOR A?$1 SILVER CERTIFICATE GREEN BACK .........
WE will soon see a 1000 to 1 devaluation of the US GREEN BACK and the world will be back on the GOLD STANDARD ........
AND THE PRINTING OF MONEY WILL CEASE ......
IT?will be tough but that is the result of KEYNES 'Airy Fairy' Notions on?Fiscal Probity ....... Keynes will go down in History as The FAILED?PROPHET ....?Reply?Report Abuse
10:37 AM on September 4, 2012
Apparently central banks are buying a lot of gold these days ...I wonder why.?Reply?Report Abuse
2:37 PM on September 4, 2012
A?good buy of gold stock would be PME: Sentry Select Primary Metals CorpT?which pays monthly cash dividend: 1.08 Yield: 12.8725; while the ETF?price has much more room to grow in gold bull market, a good buy at its?current low.?Reply?Report Abuse
10:47 PM on September 3, 2012
This is the NEW WORLD ORDER?which?will see all money disappear in all countrys as ther having finacial?problems including banks and individuals thus money will be wiped out?and ONE NEW CURRENCY will be created for all you can believe or not but?its in the works to happen very soon.?All major countrys are in deep doodoo and only way out is 3rd world war and new money to be created and to be used by all nations.?Great?old America is not the america it was once 54million people live under?the poverty line, debt is in the trillions it only has 5% of the world?population but use over 50% of the worlds resorces, so what then is left?for the other countrys, nothing.?A new begging is upon us but some dont real want to admit it!!!?Reply?Report Abuse
8:10 PM on September 3, 2012
Looks like bugs get another chance to sell.?Reply?Report Abuse
Score: -9?Adrian from Hamilton
2:17 PM on September 3, 2012
Gold is going up on speculation of QE3. When QE3 is finished gild will come right back down again.
Also?the US fiscal cliff or Greek exit from the Euro would cause the markets?to fall. Margin calls would force the selling of gold bringing the?price down. The last time markets fell it brought gold down from ~$1900?to ~$1600.?3 replies?3 replies?Report Abuse
my thought only
4:31 PM on September 3, 2012
But you forget that there may be QE4, QE5 and so on.?Report Abuse
Adrian from Hamilton
7:33 PM on September 3, 2012
Actually?I saw an analyst saying the US will be forced to return to the gold?standard in 2 years as the US dollar will be worthless by then. (TWO?YEARS???)?There isn't enough gold to be the world's reserve currency.?Report Abuse
7:37 PM on September 3, 2012
"There isn't enough gold to be the world's reserve currency."
Of course there is.
at?$12,000 per ounce there is more than enough to back the US dollar in a?manner similar to other times, assuming the US has all the gold it says?it has (which I believe).
Jim Rickards covers the range of dollar values in his book Currency Wars.
Its cute how people look at the current price of gold and cannot imagine a solution...